Act 52 of 2013 - Tell your legislators NOT to repeal this important tax exemption!

Governor Wolf’s proposed state budget includes a repeal of Act 52 (2013), which guarantees tax-free aircraft maintenance and parts sales to Pennsylvania airports and aircraft maintenance facilities. ACP has worked closely with our airports and national aviation associations, together urging our legislators not approve any legislation resulting in a repeal of Act 52. We have told them that the effect of repealing this important legislation would be a negative impact on the Pennsylvania aviation industry and result in our state being categorized as “non-aviation friendly” by aircraft owners and operators.

In 2013, then Governor Tom Corbett signed into law Act 52. Among other business environment improvements the Act created, it provided sales tax relief for aircraft parts and maintenance in Pennsylvania.

The national median annual wage for aircraft and avionics equipment mechanics and technicians was $58,390 in May 2015. Pennsylvania's rate is $55,950.

Growth in Based AircraftSimilarities can be drawn to the conclusions based upon available Federal Aviation Administration data on based aircraft for the State of Pennsylvania. The following chart illustrates historic based aircraft in the state since 2004. Each year the state experienced a decline or level number of based aircraft until the passage of Act 52 in 2013. In 2013 and each of the following years that data is available for, the state has made strong gains in the number of planes based in the Commonwealth. These aircraft along with the jobs and recurring tax revenue they represent are now contributing to the Pennsylvania economy.

Fiscal

Based

Fiscal

Based

Year

Aircraft

Year

Aircraft

2004

4,194

2011

3,311

2005

4,156

2012

3,312

2006

4,132

2013

3,455

2007

4,102

2014

3,517

2008

3,799

2015

3,543

2009

3,651

2016

4,539

2010

3,423

Tax ComparisonBy the time the 2017 sessions have concluded, Virginia (VA HB 1738) and Maryland (MD HB 67 / SB 159) will be added to the list of states with the same maintenance exemptions including the possibility of WV (which is currently drafting a bill). That means every state north and south of Pennsylvania provides the same exemption from Maine all the way down to South Carolina.

Implication of loss of Act 52The implication of removing this tax exemption on aircraft maintenance in PA is the equivalent of creating an up to 8% penalty (6% state sales tax + locality tax in certain areas) on any person or business who wants to acquire maintenance services in PA. Examples:

An engine overhaul on a small business jet can be as much as $200,000 per engine. As operators try to combine required maintenance services to minimize an aircraft’s down time, a single maintenance bill can and often does exceed $500,000 x PA Tax rate up to 8% would be an additional $40,000 cost for doing business in PA—that’s as much as most First Officer (co-pilot) salaries. A Flight Department choosing to go elsewhere would have already saved enough to justify an employee’s salary expense.

Average cost of engine overhaul on small GA aircraft is $25,000 using the rural 6% tax rate equates to a savings of $1500 by going out of state—Frederick Municipal Airport (AOPA's Headquarters) is only a 30 minute flight from Harrisburg area airports and a little over an hour’s drive—most pilots, would go a lot further for a lot less savings as they are notoriously frugal.

The hard truth is PA is in fact not a leader in the aircraft maintenance industry when compared to its regional neighbors. Eliminating this targeted exemption will only result in sending the business it had gained, elsewhere. As our businesses struggle to compete it will quickly become much harder to turn a profit which means loss of jobs as well as the loss of lease revenues that host airports depend on—most of which are municipally owned.